Activision slumps on popularity declines

Following what was an incredibly strong session, Activision Blizzard (NASDAQ:ATVI) reported the results of its second quarter. Prior to the announcement company shares traded higher by 1.20%, yet during the after hours session shares slide by 2.01% as fears from the street surfaced. The well-known publisher of video game titles including Call of Duty and the World of Warcraft was able to beat analyst consensus estimates on the top line with $608 million in revenues compared to the estimated $590 million. Due to the higher than anticipated revenues the company reported an earnings per share gain of $0.08 while analysts had predicted $0.05 earnings per share.

While the results were strong, the company’s flagship computer game the World of Warcraft saw its popularity decline yet again. WOW’s active user base shrank to 7.7 million monthly members, down from 8.3 million reported in the company’s first quarter results. To put the decline in perspective, the user base has dropped by 2.3 million users since the game’s peak in popularity during 2010 in which 12 million people were involved within the game. Console game sales were also in question, however, management responded by stating any weakness within this business segment was largely attributed to consumers waiting for the release of the newest versions of gaming systems.

Through a number of acquisitions and new games hitting the market over the coming months, management remained upbeat when discussing the company growth potential over the coming years. Activision is revising its 2013 GAAP outlook upward. It now expects to generate $4.31 billion in revenue. It also expects annual GAPP earnings per share to now come in at $0.77 as opposed to $0.73 estimated earlier in the year. Following the release of this data, I would expect a number of analysts to reconsider the long term potential, in terms of revenues, of the World of Warcraft brand. Later this year the release of the newest Call of Duty product should help revenues and earnings during the holiday season.

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